Eighth Avenue Austral Pty Ltd [2024] NSWSC 1262

"Is it the tree that's held in trust, or just the fruit?"

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The Ps came to Court arguing that one D - a trustee, DTee - held shares in the other D, a Co, on trust for the Ps: [1], [3], [4]

The Ps further sough for the shares be transferred to the Ps: [2]The Co’s defence essentially put the Ps to proof - a “non admission”: [5]

DTee took a more expansive approach: [5] - [8]

After particulars of its defence were sought, DTee asserted that if the Ps were benefs of a trust including shares in the Co, the Ps were entitled only to the “benefit” of those shares (e.g. dividends and franking credits) rather than the shares themselves: [9], [14], [15]

The assets underpinning the structure related to property development: [10]

Evidence suggested the Ps had made some financial contribution, despite opacity as to the structure of the transaction: [11]

In 2023, the parties entered into Declarations of Trust: [20]

DTee pointed to evidence suggesting that a unit trust was contemplated by the parties abrogating the need for trust decs. The Court found that even if the trust decs were illogical or unnecessary, they bound the parties and would need to be considered: [18]

Dividend statements suggesting dividends and franking credits passed to the Ps were referred to, absent an explanation as to how this was possible noting the Ps were not shareholders: [19]

The trust decs and the Co’s conduct were consistent with the shares, and not merely the “benefit” of the shares, being held on trust for the Ps: [21] - [23]

That is: the corpus of the trust included the tree, and not merely the fruit of the tree: [20]

The Ps said the trust decs unambiguously referred to the shares, and now called for their transfer whether pursuant to Saunders v Vautier or the terms of the decs themselves: [25], [26]

After considering the application principles of construction, the Court founds the trust decs were clear and that (i) they extend to a trust over the shares themselves (not merely the “benefit” of them); and (ii) create a covenant to transfer the shares on demand: [29]

DTee queried whether the corpus of the trust was sufficiently certain, noting DTee held a “pool” of shares and that none of the shares in the pool could be attributed precisely to an individual P: [30], [34]

The Court disagreed, finding that a beneficiary could have a beneficial interest in a specified number of a larger parcel of shares: [31] - [34]

Having so found, the Court considered orders transferring the shares back to the Ps (whether pursuant to Saunders v Vautier or the terms of the trust decs) were appropriate: [35]

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